back to article Will someone think of the taxpayer? UK.gov needs to stop burning billions on shoddy procurement, says Reform

An independent watchdog capable of imposing fines should be set up to tackle the billions of pounds wasted by purchasing departments in the UK public sector, according to the Reform think tank. In a report titled The Price of Poor Procurement (PDF), Reform said between 2016 and 2019, the British government spent an estimated £ …

  1. Anonymous Coward
    Anonymous Coward

    Fines ?

    Rather than fines on an organisation that is already wasting vast sums of money wouldn't prison sentences for the bosses be more of a deterrent ? Including prison sentences for the bosses of companies that fail to deliver the software that they were paid to deliver.

    1. BebopWeBop Silver badge

      Re: Fines ?

      With some protections - there may be a mitigating circumstance, but there will be no appropriate penalties while ex-ministers and senior civil servants sit on the boards.

    2. macjules Silver badge

      Re: Fines ?

      Yes, agree. But what do we get instead? "Let's set up yet ANOTHER body to do oversight". We already have a body to deal with oversight: it is called the Serious Fraud Office.

      It is high time that we saw Capita prosecuted on a simple charge of deception for winning a contract on their "ability to deliver" yet not knowing how to do the job required.

    3. jmch Silver badge

      Re: Fines ?

      Fines on government organisations don't work, it's not 'their' money.

      What is needed is that EVERY contract must follow a template that binds the supplier to specific deliverables in specific times, with large and inescapable penalties for non-delivery. Private companies certainly are very sensitive to potential fines, and their bosses will quickly realise that over-promising will cost them.

      I wouldn't go so far as prison sentences on the government procurement side (except of course in cases of manifest corruption), but potential monetary fines in a personal capacity for those who sign procurement contracts without those specific terms should be enough of a deterrent.

      In either case the big issue is whether any fines / penalties / prison sentences would ever be triggered/enforced, since the biggest problem is the same people in the revolving doors between big business and higher echelons of civil service, and any 'independent' auditor will likely be drawn from these same ranks

      1. Yet Another Anonymous coward Silver badge

        Re: Fines ?

        Followed by a massive increase in paperwork and costs.

        If I can get fired/fined/imprisoned for popping down to staples for a printer cartridge then I'm going to have 400page policy on terms and conditions for printer cartridge supply that only Capita can meet

        And I'm going to be paying 100x as much to cover all the lawyers signing off on this

      2. St Marlowe

        Re: Fines ?

        "What is needed is that EVERY contract must follow a template that binds the supplier to specific deliverables in specific times, with large and inescapable penalties for non-delivery. Private companies certainly are very sensitive to potential fines, and their bosses will quickly realise that over-promising will cost them."

        The Template should also BIND the customer to the Spec that they signed up for. While an in-house project has the ability to move the goalposts, expecting a suppler to respond to suh moves at pace without incurring costs is unreasonable and leads to high costs for change management

  2. Headley_Grange Silver badge

    Growth or Real Cost?

    My experience of government procurement (infrastructure projects) is that gov has a strategy of negotiating a requirement that's less than what's required so that the cost fits into the budget. Once the contract is awarded there follows an almost continuous struggle between gov and supplier as the gov fights to grow scope to meet the real requirement and the supplier fights to get paid for it. In the gov accounts this will show as cost growth against the original budget, but in reality it's the true cost of delivering the real requirement plus the cost of running a very inefficient project. It would be interesting to know how many of these £billions is not really waste, but the real cost of procurements if they had been fully specced in the first place

    1. BigAndos

      Re: Growth or Real Cost?

      This happens in the private sector too, especially with technology projects. Most organisations make it very hard to get business cases for IT projects approved which leads to artificially low costs being approved, followed by overruns when the project is underway.

      You also have the optimism bias with any estimates/costings that assume most things will go well and there are no scope gaps. Of course once you've started spending on a project it is always seen as preferable to "just keep going" and add budget when sometimes a badly specified project should just go back to the drawing board....

      1. Evil_Goblin

        Re: Growth or Real Cost?

        But the Treasury Green Book even includes such things:

        https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/685903/The_Green_Book.pdf

        Pity many don't seem to read / apply it - but new Equipment / Development projects should have between 10 and 54 weeks added and CapEx increased by between 10% and 200% to account for optimism bias.

  3. @JagPatel3

    Government has lost the capability to commission outsourced contracts

    Of the £292 billion the UK government spends each year to purchase goods, services and labour from the private sector, about £57 billion goes to privately-owned entities specialising in outsourced public services – an amount which is only set to rise in the coming years, as more and more public service provision work is outsourced by this, and successor governments.

    However, there is a question mark over the ability of central government departments to commission and oversee the proper functioning of outsourced service provision contracts to the satisfaction of external auditors, not least, because they simply do not have adequate numbers of suitably qualified and experienced staff on their payroll.

    Asked by the Chair of the Public Administration and Constitutional Affairs Committee, Bernard Jenkin on what confidence Parliament can have in government making rational decisions, based upon evidence about whether to outsource or not, the then Comptroller and Auditor General Sir Amyas Morse* gave this astonishing reply:

    “….. I think there are a lot of areas where Government does not have the capacity to do anything else but outsource. The Government are not set up to deliver all these contracts themselves, and that has been the case for a number of years. Therefore, the capacity, the volume of resource they would have to have internally to do this work, is not there, and has not been there for some time. Not only that, but in many parts of government, the capability of even acting as a prime contractor is not necessarily there. That is not a fault. It has been a choice that parts of government have made over time.”

    Sir Amyas Morse, who has just completed 10 years as C&AG, has had a ringside view of the inner workings of government and is therefore extremely well-positioned to comment on the outsourcing experiment.

    One of the reasons for this almost non-existent capability in Whitehall is that public servants who used to perform these tasks have ended up on the payroll of outsourced public service providers in the private sector, via the ‘revolving door’.

    This is because the Business Model of early pioneers of outsourcing was predicated upon the belief that there will always be a willing and limitless supply of people coming over from the state sector to execute the contracted work, without requiring any investment to be made in conversion training, as they were already accomplished in the job in the public sector. Of course, this was true during the early days of privatisation, but it is no longer valid now, with the source of cheap and ready labour having all but dried up – which would explain why outsourcing contractors’ businesses are in such big trouble.

    This mass influx into the private sector would also explain why staff on outsourcing contractors’ payroll today is made-up entirely of people who were previously in the pay of the State. Which begs the question, what are the tens of thousands of people currently in Whitehall doing?

    But the real tragedy about this outsourcing experiment is that people who were previously in the pay of the State have replicated the same failure in the private sector, as recent examples have all too clearly demonstrated.

    At this point, it is as well to reflect upon the reasons why the government went down the road of outsourcing public services in the first place – because, people in the pay of the State who were charged with doing this job had, for many decades, failed abysmally to show any improvement in their performance, notwithstanding persistent demands from the governing elite, of all political persuasions.

    @JagPatel3

    * See answer to Q496, oral evidence from Sir Amyas Morse before the Public Administration and Constitutional Affairs Committee, Inquiry into Sourcing public services: lessons to be learned from the collapse of Carillion, HC 748, 24 April 2018 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-administration-and-constitutional-affairs-committee/sourcing-public-services-lessons-to-be-learned-from-the-collapse-of-carillion/oral/82098.html

    1. fwthinks

      Re: Government has lost the capability to commission outsourced contracts

      I have seen similar issues in private companies - when they outsource such a large percentage of the work, they simply lose the capability to manage suppliers or understand what they are doing. Leading to failed projects or overspending - as there is little incentive for suppliers to complete early or under budget.

      Companies, and just as equally, government - need to have a significant percentage of skilled resources to provide proper oversight and governance. I would suggest a minimum of 20% of a project should be from in-house and cover key roles such as project management, architecture and security. Really you just want a supplier to provide the specialist resources or perform the volume grunt work.

      1. Intractable Potsherd Silver badge

        Re: Government has lost the capability to commission outsourced contracts

        As a rule of thumb, keep the layers of contracts to a minimum. The ideal is to keep things in-house, because you have direct control over everything and everybody involved. Occasionally, outsourcing to individuals will make sense - again, control is maintained. Beyond that, chaos is more likely than not - a contract with an outsourcing company requires staff under their control to deliver things, and may involve endless sub-contracts.

    2. zaax

      Re: Government has lost the capability to commission outsourced contracts

      Because of the lack of pay which is about 20% behind the private sector staff can't either be employed, or if they are the leave very soon after.

  4. steelpillow Silver badge

    Nice try sisters and brothers, but...

    Sorry, but this will not work. The real problem is that departmental procurement policies are hopelessly outdated and unworkable. The more you threaten sanctions, the more the droids follow those policies to the letter. For example a certain large government organization I worked in had an IT procurement policy over ten years old and half the approved companies on it didn't even exist any more.

    Getting the policy updated must in turn follow a vast and labyrinthine review process, consume huge resources in its own right and take years to work through, there are never sufficient resources or priority to do so and even if it were done the outcome would be out of date before it was signed off. The fact that the No.1 approved company also wrote the unworkable review procedure, effectively locking itself in place, is not taken into account. Even exhortations and threats from the Cabinet Office cannot open anything up, all they can do is rearrange a few tower contracts deckchairs.

    There is in theory a very simple way out: a legally binding diktat from the top to abandon all Departmental IT procurement policies and follow a single centrally-maintained one.

    Of course, in practice the drafting of that new policy will be put out to tender under an existing policy....

    1. BigAndos

      Re: Nice try sisters and brothers, but...

      They'd probably outsource writing the policy to Capita...

    2. Evil_Goblin

      Re: Nice try sisters and brothers, but...

      And the project to write the tender and scope of the new policy drafting project will in itself be outsourced, and cost a few £100m, and overrun... its turtles, sorry, contracts, all the way down

  5. Anonymous Coward
    Anonymous Coward

    An independent watchdog capable of imposing fines

    on independent watchdogs capable of imposing fines

  6. Roland6 Silver badge

    "create a regulator with teeth and deeper pockets" - It's only taken circa 30 years...

    Until circa 1989 the CCTA had teeth with respect to IT procurement. M.Thatcher and her advisors decided it was preventing the operation of (their idea of) a free market and removed its teeth; the rest is history...

  7. 0laf Silver badge
    Facepalm

    On the flipside if you procure for government even in a very small way, if you step outside the rules in the slightest many companies are very quick to challenge and threaten legal action.

    It makes for a very bureaucratic and inflexible process which is pretty unpleasent for all parties and rarely gets to the desired outcome.

    1. Dr. Mouse Silver badge

      This is an issue in all sorts of situations, but is very necessary at times. It doesn't only apply to govt projects.

      I'm looking at this from an IT project perspective, but it applies to many.

      At the start, the scope and price are agreed. If the consultancy allows scope creep, the timescales and costs to them skyrocket. Therefore anything outside the agreed scope needs to be costed as an extra. Yes, this feels very bureaucratic, but it's necessary.

      If, instead, the consultancy allows changes to the scope within the project without the bureaucracy etc, the "blame" falls the other way. The consultancy ends up having higher costs, the project becomes unprofitable and the project team get a hammering from C-suite and shareholders. The timescales also change, and the consultancy can get hit with penalties for not delivering on time.

      The larger the project, the more important this is, but even on my own level (small, one-man consultant developer) I have to be careful to clearly define the scope of the works and stick to it. I can offer a small amount of flexibility on an ad-hoc basis, but it doesn't take much for things to get out of hand...

      1. fredj

        You can never specify a technical project these days. Science and engineering is evolving too fast.

        What you can do is specify what you want to achieve and when. There may be an rider such as made in UK only.

        By doing this the whole procurement is on the shoulders of the supplier. BUT what it does mean is that the functionality required has to be right and remain unchanged. This is always a problem for an admin civil servant because they are way out of their depth with technology. In the halcyon days of yore our civil service did have scientific groups of an extremely high technical standard. Instead of paying these people properly they were outsourced as companies and sold to private concerns who failed to maintain these centres of excellence.

        Go To the top of my comment and start again you are in a never ending loop.

        If you have pressed the escape key I can say that I have had to sort out some scientific instrument and contracts and concentrating on functionality really does sharpen up the supplier very quickly in a way that is beyond your own staff.

    2. Anonymous Coward
      Anonymous Coward

      if you step outside the rules in the slightest many companies are very quick to challenge and threaten legal action

      And, while some organisations on the catalogue are capable of being flexible, some of the bigger ones very much take a "this is what we offer and we won't vary" simply because of their market power. And, sadly, a lot of the smaller companies seem to have senior managment who have worked at the larger outsourcers so they repeat the mistakes of the big organisations at a smaller scale.

      Which is why some things get insourced after years of being outsourced.

  8. codejunky Silver badge

    Ha

    The gov is throwing your money away, so they should throw some at me. Good sales pitch.

    However a simpler solution would be the gov getting less of our money. Force it to shrink to more manageable levels.

  9. beast666

    Nonsense. Cutting income tax and VAT would focus the 'minds' of govt. depts.

  10. Hans Neeson-Bumpsadese Silver badge

    Creation of a regulator for this is an excellent idea. What are the odds that responsibility for running it will get outsourced to Capita? Place your bets now.

  11. TimR

    The real cost?

    "...a 20 per cent increase on predicted costs"

    "...a 50 per cent increase on original cost estimates"

    "Ofpro would cost between £30m and £90m a year...the think tank estimated"

    So, how much would Ofpro really cost?

  12. iron Silver badge

    "We're spending too much money!"

    "Spend money on a new quango to counter it!"

    Typical government.

  13. a pressbutton

    I recommend Ronald Coase

    https://en.wikipedia.org/wiki/Ronald_Coase

    One of the greatest economists a non economics person has never heard of.

    Back in *1937* he wrote "The Nature of the Firm" and that essay was one of the first works on why companies exist rather that groups of independant traders and why they only get so big.

    It looks like that some time ago govt got just too big and complex to be efficient.

    Outsourcing probably does not fix that.

    Devolving control to smaller independent entities _might_

    1. Yet Another Anonymous coward Silver badge

      Re: I recommend Ronald Coase

      His conclusion was that firms avoid the friction and administrative costs of dealing with separate suppliers for each task.

      Now we work for companies where it is 10x more expensive in time and money to get an official pool car than to take an Uber. Even worse if you work for government and double if you work for military/security

  14. Archtech Silver badge

    Government logic

    "Will someone think of the taxpayer? UK.gov needs to stop burning billions on shoddy procurement, says Reform

    The solution: create a regulator with teeth and deeper pockets".

    In plain English: how can we stop wasting so much money? Answer: spend lots more money.

  15. Claverhouse Silver badge
    Mushroom

    Rise of the Mini-Kochs

    Reform Think Tank:

    "It should not matter who provides goods or services if they are of the highest quality and value for money for the commissioner and, ultimately, the taxpayer. Dogmatic beliefs – in either the value of public-sector markets or the benefits of in-house provisions – risk poor policy making, which in turn is detrimental to all citizens whose daily lives are impacted by state services."

    Reform is a free market British think-tank that describes itself as an "independent, non-party think tank whose mission is to set out a better way to deliver public services and economic prosperity."

    "We believe that by liberalising the public sector, breaking monopoly and extending choice, high quality services can be made available for everyone.

    https://www.sourcewatch.org/index.php/Reform_%28UK_think_tank%29

    E.G.: a pathetic libertarian free-market front.

    .

    Institute for Government Think Tank:

    A separate report from the Institute for Government, a charity aimed at improving public sector efficiency, recently found that outsourcing in government has largely worked.

    Founded with a grant from Lord Sainsbury. Board of Governors: Chairman of the Board - Lord Sainsbury, Jocelyne Bourgon, Sir Andrew Cahn, Dame Sandra Dawson, Lord Currie of Marylebone, Miranda Curtis, Lord Heseltine, Susan Hitch, Sir Andrew Likierman, John Sharkey, Jonathan Stephens, Lord Stevenson of Coddenham, Lord Simon of Highbury

    It engages with UK MPs, senior civil servants and others by: supporting the development and skills of senior public servants, politicians and political advisors. conducting and funding research on public administration and government. providing 'thought leadership' on effective government through publications, seminars and events.

    .

    https://en.wikipedia.org/wiki/Institute_for_Government

    https://www.sourcewatch.org/index.php?title=Institute_for_Government

    E.G.:Yet another pathetic libertarian free-market front.

    .

    .

    'Thought Leadership'... Dear God

  16. adam payne Silver badge

    Reform praised the work of the National Audit Office and Public Accounts Committee, but called for a body with more teeth to impose fines. An independent procurement regulator – the Office for Public Procurement (Ofpro) – could help tackle the wastage, it said.

    So you want yet another regulator setup to waste even more money.

    How much would Ofpro really cost us tax payers?

  17. smudge Silver badge

    Where do the procurement staff come from?

    One interesting question would be whether the costs of procurement are reduced by having so many private sector contractors working for the procurement agencies, or are they increased?

    I retired a few years ago, but worked as a prospective supplier on bids managed by, amongst others, MoD Abbey Wood, the MoJ, the Cabinet Office, and indeed I worked on a bid for e-Borders, though not with Raytheon.

    In all these cases, many, if not most, of the procurement staff that we dealt with were contractors, from our competitors. Indeed one question was always "Do we want to put people into that procurement organisation, getting steady money but disqualifying us from bidding for the programmes, or do we take the riskier but potentially much more rewarding approach of bidding for the programmes?".

  18. Venerable and Fragrant Wind of Change

    Precedent

    Not remotely surprised to see other commentards have already expressed some of the obvious cynicism.

    But we can do better: what about all those useless watchdogs that already exist? Like the financial regulator, known as the Fundamentally Complicit Authority. Or perhaps even the Serious Fraud (coverup) Office.

  19. Dave Bell

    It looks like the Civil Service is full of problems.

    This looks like an echo of Jim Hacker's "Department of Administrative Affairs", which functioned as an excuse for that TV show to mock anything.

    We can at least hold a General Election, if we have an incompetent government. There seems to be little we can do about a Civil Service that fails.

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